On 4 January 2010 the Prime Minister issued Decree No. 01/2010/ND-CP ("Decree 01") providing for both the private placement of shares by Vietnamese shareholding companies ("Offering Enterprise") and the administrative penalties for offences in relation to such private placement activities.
Shareholding companies established and operating under foreign laws are not permitted to offer shares in Vietnam unless otherwise stipulated in international treaties to which Vietnam is a member.
Applicable entities are (i) shareholding companies and (ii) enterprises converting into shareholding companies, except for wholly State-owned enterprises converting into shareholding companies.
Decree 01 defines private placement as a direct offer for sale of shares or share options, not using the mass media, to either (i) professional securities investors or (ii) non-professional securities investors (provided the number of such investors is not greater than one hundred). This mode of share sale contrasts sharply with a public offer of securities, which includes an offer for sale of securities: (i) via the mass media, including the internet; (ii) to one hundred or more investors, excluding institutional securities investors; and (iii) to a number of undefined investors.
The State bodies in charge of private placement of shares comprise: the State Bank of Vietnam (in relation to credit institutions); the Ministry of Finance (in relation to insurance companies); the State Securities Commission (in relation to securities companies, fund management companies, and public companies, except those operating in the credit and insurance fields); and the relevant Departments of Planning and Investment, management authorities of industrial zones, export processing zones, high technology zones, economic zones (in relation to shareholding companies other than those mentioned above).
In order to privately place shares, the Offering Enterprise must:
- Be an applicable entity mentioned above
- Have a corporate resolution approving the private placement plan and the plan for use of proceeds received from private placement adopted pursuant to the company charter
- Have an offering plan identifying the target investors and suspending the transfer of shares for at least one year after completion of each placement
- Formulate criteria for identifying and selecting strategic partners (if any)
- Send a complete and valid application file for registration of private placement of shares to the relevant State body not less than 20 days prior to the proposed date of private placement
- Conduct private placement with tranches at least six months apart from each other
- Comply with requirements on capital contribution ratio and investment form where there is foreign investor participation
Decree 01 sets out the following obligations to be performed by Offering Enterprises:
- To refrain from advertising their private placement in the mass media both 90 days prior to, and during, the period of private placement
- To send to the relevant State body their file for registration of private placement of shares
- To provide information on their private placement to investors
- To organise their private placement in strict accordance with the plan registered with the relevant State body
Decree 01 also provides for penalties for administrative offences in the activities of private placement. Breaching the provisions on reporting and disclosure of information will result in a warning or a fine between VND10 million and VND30 million (about USD500-1,600). However, breaching the provisions on documentation, conditions and organisation of sale offers may result in a fine from VND30 million to VND100 million (about USD1,600-5,300).
Decree 01 takes effect from 25 February 2010.